Following President Trump’s decision on 8 May, 2018 to withdraw the United States from the Joint Comprehensive Plan of Action (“JCPOA”), the US government announced that it would re-impose pre-JCPOA nuclear-related Iran sanctions (both primary and secondary) that were lifted under the JCPOA. As we reported previously, two “wind-down” periods—of 90 and 180 days respectively—commenced from the day of the announcement, during which non-US, non-Iranian companies were encouraged by the US government to withdraw from operations in Iran that would be affected by re-imposed sanctions. OFAC’s guidance discouraged non-US persons from engaging in new activity during the wind down periods, and stated that any such new activity may be a factor in connection with future enforcement action for actions taken after the wind-down period.
These are challenging times for Iraq. The Islamic State or ISIS controls thousands of square miles of territory and major Iraqi cities such as Mosul, Tikrit and Falluja. While leading the offensive against ISIS and enjoying the support of international allies, the Kurdistan Region of Iraq is seeking to secure contracts with international energy companies and export oil in order to boost its strained economy, a situation exacerbated by the cost of supporting refugees from the fighting in Syria and northern Iraq, as well as unpaid revenues owed by the Federal Government of Iraq (FGI).
In mid-November, the FGI and the Kurdistan Regional Government (KRG) announced a deal to ease tensions over Kurdish oil exports and payments from Baghdad. Under the deal, which lasts for one month only, the KRG is to provide the FGI with 150,000 barrels of oil per day in exchange for US$500 million in immediate cash payments. This was paid in two instalments last week. The 150,000 barrels of oil per day represents about half of the KRG’s export capacity, the remainder of which is still being shipped independently. The deal was reached after talks between Iraqi Oil Minister Adil Abdul Mahdi and Kurdish Prime Minister Nechirvan Barzani. At the Atlantic Council summit in Istanbul, the oil ministers of the KRG and FGI welcomed the deal as the first step in a broader effort to bridge differences over hydrocarbons. Notably, Oil Minister Abdul Mahdi appeared to acknowledge that federal legislation for petroleum might have to provide for a decentralised system, striking a tone very different from that of his predecessor.